The past months have been brutal for the UK’s retail and consumer industries, and one bank that’s felt its fair share of the pain is HSBC Holdings Plc, which has found itself on the wrong side of several of the highest-profile failures.
Last week, TV celebrity chef Jamie Oliver’s casual-dining chain was placed into protection from creditors. That left Europe’s largest bank sitting on about 30 million pounds ($38 million) of potential losses, according to a person familiar with the situation. Some 22 restaurants were shut, with the likely loss of more than 1,000 jobs.
HSBC is hardly the only lender taking a hit, but it’s one of the few to disclose some of its losses on UK retailers. It was involved in a “disproportionately high share of exposure to the small number of meaningful failures seen over recent months,” according to Investec Plc analyst Ian Gordon.
HSBC loaned money to troubled businesses including House of Fraser, Debenhams Plc and Patisserie Valerie as blows from Brexit to the inexorable march of online commerce rained down on Britain’s central shopping districts, or high streets.
“A number of lenders are facing legacy issues from loans given out during easier times in the UK retail market, and the issues they face with that are becoming more obvious,” said Tony Shiret, a retail analyst at Whitman Howard. “The banks are like the landlords, with both suffering a hangover after the party years.”
A spokeswoman for HSBC declined to comment. In first-quarter results announced this month, HSBC’s sprawling Asian footprint boosted profit, but the bank drew attention to Britain as a particular point of pain. Expected credit losses tripled to $600 million versus a year earlier, driven “by a small number” of mostly British cases, the bank said. HSBC’s global banking and markets unit took a $40 million hit for an expected credit loss in the quarter, “largely related to a single corporate exposure in the UK” that it didn’t identify.